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Semtech Stock Plunges 34% in 3 Months: Should You Buy the Dip?
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Key Takeaways
SMTC shares fell 34% in three months amid AI sector weakness, soft consumer sales and capacity constraints.
Semtech's data center revenues surged 91% year over year, driven by strong 800G demand and the 1.6T ramp.
LoRa revenues jumped 58% year over year, while fiscal 2027 and 2028 EPS estimates rose 4.9% and 15.8%.
Semtech Corporation (SMTC - Free Report) shares have plunged 34% in the past three months, underperforming the Zacks Semiconductor - Analog and Mixed industry’s decline of 2.6%. The stock also underperformed its industry peers, including Microchip Technology (MCHP - Free Report) , ON Semiconductor (ON - Free Report) and NXP Semiconductors (NXPI - Free Report) . In the past three months, shares of NXP Semiconductors have returned 1.9%, while Microchip Technology and ON Semiconductor have plunged 25.2% and 22.4%, respectively.
3-Month Price Return Performance
Image Source: Zacks Investment Research
Semtech’s recent underperformance can be attributed to the broader weakness in AI and semiconductor stocks, weakness in its high-end consumer business and capacity constraints that could limit its ability to meet strong data center demand.
Growing concerns about elevated valuations, high data center spending and the ability of AI investments to generate adequate returns have weighed on investor sentiment toward the sector. As Semtech's growth prospects are closely linked to rising demand for AI data center connectivity products, weakness across semiconductor and AI-related stocks has put additional pressure on its shares, despite strong demand for its products.
Semtech's high-end consumer revenues declined 5% year over year to $39 million in the second quarter of fiscal 2027. The segment is benefiting from demand for its TVS protection products, particularly among premium handset manufacturers, where Semtech is expanding its content per device. However, these gains have not yet translated into year-over-year revenue growth. While the company expects a sequential recovery, supported by seasonal demand and market share gains in TVS products, continued weakness could limit growth outside its data center and industrial businesses.
Capacity constraints also pose a risk to Semtech's growth prospects. Strong demand for its data center products has resulted in a record backlog, but management indicated that secured manufacturing capacity may not be sufficient to meet demand in the second half of fiscal 2028. Although the company is working with manufacturing partners to expand production, delays in capacity additions could limit its ability to fulfill customer orders and capitalize on rising demand for 800G and 1.6T connectivity products.
SMTC’s Premium Valuation Warrants a Cautious Approach
SMTC is currently trading at a higher price-to-earnings (P/E) multiple compared with the Zacks Computer and Technology sector. SMTC’s forward 12-month P/E ratio sits at 19.01X, higher than the sector’s forward 12-month P/E ratio of 17.33X. The Zacks Value Score of F also suggests that SMTC stock is overvalued.
SMTC Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
SMTC stock also trades at a higher P/E multiple compared with other industry peers, including Microchip Technology, ON Semiconductor and NXP Semiconductors. At present, Microchip Technology, ON Semiconductor and NXP Semiconductors have P/E multiples of 17.96X, 16.58X and 14.76X, respectively.
However, for investors, not everything is gloom and doom.
Semtech’s 1.6T Ramp to Drive Data Center Growth
Semtech is seeing strong demand for its data center products as hyperscalers increase spending on AI infrastructure. The company’s data center revenues reached a record $100 million in the second quarter of fiscal 2027, up 39% sequentially and 91% year over year. Growth was driven by continued strength in 800G products, along with the ramp of 1.6T CopperEdge and FiberEdge solutions. Management expects this momentum to continue, with data center revenues projected to increase 45% sequentially and 160% year over year in the third quarter of fiscal 2027.
The 1.6T transition could become an important growth driver for Semtech. Management expects 1.6T FiberEdge and CopperEdge products to account for more than 50% of total data center revenues in the third quarter of fiscal 2027. Semtech is also gaining market share in optical connectivity, where its FiberEdge business has grown from about 18% market share in 800G two years ago to more than 50%. Further, the company expects its 1.6T FiberEdge market share to exceed 50% by the end of fiscal 2027.
The company is also preparing for the next stage of data center growth. Semtech is expanding its photonics portfolio through gain chips, high-power CW lasers, semiconductor optical amplifiers and photodiodes. These products are aimed at higher-speed applications, including 3.2T transceivers and co-packaged optics. Management expects its content per transceiver to increase from high single-digit dollars to high double-digit dollars as data center speeds move from 800G to 3.2T.
Strong customer demand supports SMTC’s prospects as well, with the company reporting that its backlog for the remainder of fiscal 2027 was fully booked and more than 70% of its target for fiscal 2028 was already covered. Management is also working with manufacturing partners to secure additional capacity for fiscal 2028 and beyond. If it can meet customer requirements and maintain its product momentum, the 1.6T ramp could remain an important driver of Semtech’s data center growth over the next several quarters.
The Zacks Consensus Estimate for SMTC’s fiscal 2027 and 2028 revenues indicates year-over-year growth of 46.2% and 33.8%, respectively.
Image Source: Zacks Investment Research
Strong LoRa Growth Boosts SMTC's Prospects
Semtech is seeing strong growth in its LoRa business as demand increases across industrial, commercial and consumer applications. LoRa-enabled net sales reached a record $58 million in the second quarter of fiscal 2027, up 31% sequentially and 58% year over year. Growth reflects wider adoption of LoRa across different applications, including smart homes, security systems and industrial monitoring. Management expects the business to maintain its momentum, with LoRa revenues projected to grow about 15% sequentially and 65% year over year in the third quarter of fiscal 2027.
Semtech is expanding its LoRa portfolio to address more applications. Its LoRa Gen 4 platform supports higher data speeds while maintaining low power consumption and long-range connectivity. These features can support new uses in smart homes, security and industrial applications. For example, LoRa-enabled sensors can help monitor industrial equipment and support predictive maintenance. In public safety, the technology can also enable sensors to transmit audio for AI-based verification instead of sending simple alerts.
Amazon Sidewalk is another potential growth driver for Semtech’s LoRa business. Following Ring’s launch of a new range of LoRa-based sensors in the United States, Amazon Sidewalk is expanding internationally, starting with Canada and Mexico, while Europe, Australia and Japan are expected to follow. This expansion could help increase the use of LoRa-based devices in consumer applications through Amazon’s network. Meanwhile, LoRa Plus is gaining traction in smart home and security markets, broadening the company’s opportunities beyond traditional industrial and commercial use cases.
Strong momentum in LoRaWAN, LoRa Plus and Amazon Sidewalk can also support SMTC’s future growth. Management expects LoRa revenues to grow at a rate above its previous 20% benchmark, supported by demand across these applications. With record revenues, new use cases and expanding distribution through Amazon Sidewalk, LoRa could become an increasingly important contributor to Semtech’s overall growth.
The Zacks Consensus Estimate for SMTC’s fiscal 2027 and 2028 earnings per share (EPS) implies year-over-year growth of 113.5% and 78.8%, respectively. EPS estimates for fiscal 2027 and 2028 have been revised upward by 4.9% and 15.8%, respectively, over the past 30 days.
Image Source: Zacks Investment Research
Conclusion: Buy SMTC Stock Right Now
Semtech’s near-term outlook faces some pressure from the broader selloff in AI and semiconductor stocks, declining high-end consumer revenues, an outstretched valuation and manufacturing capacity constraints. However, strong demand for 800G and 1.6T data center products, a fully booked backlog for the remainder of fiscal 2027 and growing adoption of LoRa solutions support the company’s growth prospects. Rising demand for AI infrastructure, expansion into 3.2T connectivity products and strong upward earnings estimate revisions further support the company’s outlook. These factors position Semtech for continued growth, making SMTC stock an attractive buy at current levels.
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Semtech Stock Plunges 34% in 3 Months: Should You Buy the Dip?
Key Takeaways
Semtech Corporation (SMTC - Free Report) shares have plunged 34% in the past three months, underperforming the Zacks Semiconductor - Analog and Mixed industry’s decline of 2.6%. The stock also underperformed its industry peers, including Microchip Technology (MCHP - Free Report) , ON Semiconductor (ON - Free Report) and NXP Semiconductors (NXPI - Free Report) . In the past three months, shares of NXP Semiconductors have returned 1.9%, while Microchip Technology and ON Semiconductor have plunged 25.2% and 22.4%, respectively.
3-Month Price Return Performance
Image Source: Zacks Investment Research
Semtech’s recent underperformance can be attributed to the broader weakness in AI and semiconductor stocks, weakness in its high-end consumer business and capacity constraints that could limit its ability to meet strong data center demand.
Growing concerns about elevated valuations, high data center spending and the ability of AI investments to generate adequate returns have weighed on investor sentiment toward the sector. As Semtech's growth prospects are closely linked to rising demand for AI data center connectivity products, weakness across semiconductor and AI-related stocks has put additional pressure on its shares, despite strong demand for its products.
Semtech's high-end consumer revenues declined 5% year over year to $39 million in the second quarter of fiscal 2027. The segment is benefiting from demand for its TVS protection products, particularly among premium handset manufacturers, where Semtech is expanding its content per device. However, these gains have not yet translated into year-over-year revenue growth. While the company expects a sequential recovery, supported by seasonal demand and market share gains in TVS products, continued weakness could limit growth outside its data center and industrial businesses.
Capacity constraints also pose a risk to Semtech's growth prospects. Strong demand for its data center products has resulted in a record backlog, but management indicated that secured manufacturing capacity may not be sufficient to meet demand in the second half of fiscal 2028. Although the company is working with manufacturing partners to expand production, delays in capacity additions could limit its ability to fulfill customer orders and capitalize on rising demand for 800G and 1.6T connectivity products.
SMTC’s Premium Valuation Warrants a Cautious Approach
SMTC is currently trading at a higher price-to-earnings (P/E) multiple compared with the Zacks Computer and Technology sector. SMTC’s forward 12-month P/E ratio sits at 19.01X, higher than the sector’s forward 12-month P/E ratio of 17.33X. The Zacks Value Score of F also suggests that SMTC stock is overvalued.
SMTC Forward 12-Month P/E Ratio
Image Source: Zacks Investment Research
SMTC stock also trades at a higher P/E multiple compared with other industry peers, including Microchip Technology, ON Semiconductor and NXP Semiconductors. At present, Microchip Technology, ON Semiconductor and NXP Semiconductors have P/E multiples of 17.96X, 16.58X and 14.76X, respectively.
However, for investors, not everything is gloom and doom.
Semtech’s 1.6T Ramp to Drive Data Center Growth
Semtech is seeing strong demand for its data center products as hyperscalers increase spending on AI infrastructure. The company’s data center revenues reached a record $100 million in the second quarter of fiscal 2027, up 39% sequentially and 91% year over year. Growth was driven by continued strength in 800G products, along with the ramp of 1.6T CopperEdge and FiberEdge solutions. Management expects this momentum to continue, with data center revenues projected to increase 45% sequentially and 160% year over year in the third quarter of fiscal 2027.
The 1.6T transition could become an important growth driver for Semtech. Management expects 1.6T FiberEdge and CopperEdge products to account for more than 50% of total data center revenues in the third quarter of fiscal 2027. Semtech is also gaining market share in optical connectivity, where its FiberEdge business has grown from about 18% market share in 800G two years ago to more than 50%. Further, the company expects its 1.6T FiberEdge market share to exceed 50% by the end of fiscal 2027.
The company is also preparing for the next stage of data center growth. Semtech is expanding its photonics portfolio through gain chips, high-power CW lasers, semiconductor optical amplifiers and photodiodes. These products are aimed at higher-speed applications, including 3.2T transceivers and co-packaged optics. Management expects its content per transceiver to increase from high single-digit dollars to high double-digit dollars as data center speeds move from 800G to 3.2T.
Strong customer demand supports SMTC’s prospects as well, with the company reporting that its backlog for the remainder of fiscal 2027 was fully booked and more than 70% of its target for fiscal 2028 was already covered. Management is also working with manufacturing partners to secure additional capacity for fiscal 2028 and beyond. If it can meet customer requirements and maintain its product momentum, the 1.6T ramp could remain an important driver of Semtech’s data center growth over the next several quarters.
The Zacks Consensus Estimate for SMTC’s fiscal 2027 and 2028 revenues indicates year-over-year growth of 46.2% and 33.8%, respectively.
Image Source: Zacks Investment Research
Strong LoRa Growth Boosts SMTC's Prospects
Semtech is seeing strong growth in its LoRa business as demand increases across industrial, commercial and consumer applications. LoRa-enabled net sales reached a record $58 million in the second quarter of fiscal 2027, up 31% sequentially and 58% year over year. Growth reflects wider adoption of LoRa across different applications, including smart homes, security systems and industrial monitoring. Management expects the business to maintain its momentum, with LoRa revenues projected to grow about 15% sequentially and 65% year over year in the third quarter of fiscal 2027.
Semtech is expanding its LoRa portfolio to address more applications. Its LoRa Gen 4 platform supports higher data speeds while maintaining low power consumption and long-range connectivity. These features can support new uses in smart homes, security and industrial applications. For example, LoRa-enabled sensors can help monitor industrial equipment and support predictive maintenance. In public safety, the technology can also enable sensors to transmit audio for AI-based verification instead of sending simple alerts.
Amazon Sidewalk is another potential growth driver for Semtech’s LoRa business. Following Ring’s launch of a new range of LoRa-based sensors in the United States, Amazon Sidewalk is expanding internationally, starting with Canada and Mexico, while Europe, Australia and Japan are expected to follow. This expansion could help increase the use of LoRa-based devices in consumer applications through Amazon’s network. Meanwhile, LoRa Plus is gaining traction in smart home and security markets, broadening the company’s opportunities beyond traditional industrial and commercial use cases.
Strong momentum in LoRaWAN, LoRa Plus and Amazon Sidewalk can also support SMTC’s future growth. Management expects LoRa revenues to grow at a rate above its previous 20% benchmark, supported by demand across these applications. With record revenues, new use cases and expanding distribution through Amazon Sidewalk, LoRa could become an increasingly important contributor to Semtech’s overall growth.
SMTC’s Earnings Estimate Revision Shows Upward Trend
The Zacks Consensus Estimate for SMTC’s fiscal 2027 and 2028 earnings per share (EPS) implies year-over-year growth of 113.5% and 78.8%, respectively. EPS estimates for fiscal 2027 and 2028 have been revised upward by 4.9% and 15.8%, respectively, over the past 30 days.
Image Source: Zacks Investment Research
Conclusion: Buy SMTC Stock Right Now
Semtech’s near-term outlook faces some pressure from the broader selloff in AI and semiconductor stocks, declining high-end consumer revenues, an outstretched valuation and manufacturing capacity constraints. However, strong demand for 800G and 1.6T data center products, a fully booked backlog for the remainder of fiscal 2027 and growing adoption of LoRa solutions support the company’s growth prospects. Rising demand for AI infrastructure, expansion into 3.2T connectivity products and strong upward earnings estimate revisions further support the company’s outlook. These factors position Semtech for continued growth, making SMTC stock an attractive buy at current levels.
Currently, SMTC sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.